Foxtel CEO Patrick Delany
Foxtel CEO Patrick Delany. (Image: AAP/Tracey Nearmy)

Pay television came late to Australia. It never had deep penetration, and now it’s all but vanishing in the face of changing watching habits accelerated by the COVID-19 crisis.

Like Wile E. Coyote, it’s out over the canyon, pedalling hard at thin air to stay aloft.

Pay TV has always faced an unavoidable constraint on human activity: we can only watch one television show at a time. But in Australia, its end has been hurried on by News Corp’s long term determination to have monopoly control through Foxtel.

By 2019, company figures suggest take-up was down to about one in five households. In the US cable still connects more than half of all households, down from about two-thirds in 2000.

COVID-19 is hitting Foxtel every which way. With bars and clubs closed, it’s lost critical revenues from commercial subscriptions. Cash-hit households are reviewing discretionary expenditures, and advertising is being hammered.

Just before Easter, Foxtel sacked 200 staff and sent another 140 on leave.

The shock has stymied the company’s pivot to streaming, with Foxtel Now (for drama) and Kayo (for sport).

Our changing habits are driving the shift, as highlighted in last week’s options paper on media regulation released by the federal government.

Since the launch of Netflix and Stan in Australia, eyeballs on so-called “linear TV” — both free-to-air and pay — have been sliding. Commercial TV is down 10 points to 75% of adult audiences. Pre-COVID-19 ad revenue has followed it down, about 7.5% on the three networks’ pre-Netflix peak. It’s estimated to be down a further 30% right now.

It’s bad, but the networks reckon they can reset at a lower level. As Crikey reported last week, that’s behind both the broadcast punch-up over rugby league restarting and the government’s media bailout.

Foxtel is significantly weaker, with its residential pay-tv subscriptions less than half those of Netflix. Now revenues look like they’re also falling behind the streaming giant, earlier than expected.

It’s been 20-odd years coming, ever since the company decided it would rather have Foxtel as a cash-cow monopoly than a competitor in a larger market. News Corp vertically integrated to control both distribution (through its cables and set-top boxes) and programming (through channel ownership of Fox Sport and now Sky).

It blocked competitors by declining to carry an early iteration of an ABC-backed news channel or a Kerry Stokes-backed sports channel. It spent money to buy audiences, including $100 million-plus on the breakaway Super League.

Foxtel was always richly priced (its “platinum plus” full package is still $139 per month). Between Australia’s free offering on commercial and public broadcasting and the DVD boomlet, it never reached more than 30% of Australian households.

As a result, News Corp could never persuade successive governments to remove the poison pill left by the Keating government: so-called anti-siphoning laws which prevented them buying exclusive rights to major sports — the strategy that drove subscription broadcasting in the UK and the US.

News Corp has seen this coming. It tried to postpone the day of reckoning once by campaigning against the NBN.

After the UK hacking scandal forced the Murdochs to split their print and broadcast interests in 2013, Foxtel was left behind in the print-based News Corp. Pity. If it had been otherwise, the company would now be safely lost in the Disney behemoth like, say, Star India.

Instead, in the much smaller News Corp the rescue plan was to merge Foxtel (50-50 owned with Telstra) with the wholly-owned Fox Sports and float the new Foxtel on the ASX. The merger went ahead in 2018, giving News 65%, but all talk of a float has dissipated.

Foxtel’s streaming pivot has struggled to compete on price and on UX, despite its strong drama product (as a result of a tie-up with US prestige channel HBO). The summer bushfires got in the way of a cricket-driven kick start of Kayo. Then the winter football codes were stopped by COVID-19.

The moral? The insistence on monopoly made pay TV in Australia nothing more than a transitional technology.

With the plethora of choice from over-the-top streaming, it won’t be missed.